Self-Regulatory Organizations: Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Transaction Fees Pursuant to IEX Rule 15.110, 17654-17658 [2021-06886]

Download as PDF 17654 Federal Register / Vol. 86, No. 63 / Monday, April 5, 2021 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 J. Matthew DeLesDernier, Assistant Secretary. SECURITIES AND EXCHANGE COMMISSION [FR Doc. 2021–06884 Filed 4–2–21; 8:45 am] Self-Regulatory Organizations: Investors Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Transaction Fees Pursuant to IEX Rule 15.110 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91443; File No. SR–IEX– 2021–05] March 30, 2021. Sunshine Act Meetings 2:30 p.m. on Thursday, April 1, 2021. PLACE: The meeting will be held via remote means and/or at the Commission’s headquarters, 100 F Street NE, Washington, DC 20549. STATUS: This meeting will be closed to the public. MATTERS TO BE CONSIDERED: Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the closed meeting. Certain staff members who have an interest in the matters also may be present. In the event that the time, date, or location of this meeting changes, an announcement of the change, along with the new time, date, and/or place of the meeting will be posted on the Commission’s website at https:// www.sec.gov. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B) and (10) and 17 CFR 200.402(a)(3), (a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and (a)(10), permit consideration of the scheduled matters at the closed meeting. The subject matter of the closed meeting will consist of the following topics: Matters related to litigation; and Other matters relating to examinations and enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting agenda items that may consist of adjudicatory, examination, litigation, or regulatory matters. CONTACT PERSON FOR MORE INFORMATION: For further information; please contact Vanessa A. Countryman from the Office of the Secretary at (202) 551–5400. jbell on DSKJLSW7X2PROD with NOTICES TIME AND DATE: Dated: April 1, 2021. Vanessa A. Countryman, Secretary. [FR Doc. 2021–07081 Filed 4–1–21; 4:15 pm] BILLING CODE 8011–01–P 20 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:23 Apr 02, 2021 Jkt 253001 Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that, on March 23, 2021, the Investors Exchange LLC (‘‘IEX’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Pursuant to the provisions of Section 19(b)(1) under the Act,3 and Rule 19b–4 thereunder,4 IEX is filing with the Commission a proposed rule change to amend its Fee Schedule, pursuant to IEX Rule 15.110(a) and (c) (the ‘‘Fee Schedule’’), to modify the fees applicable to executions of and with displayed orders for securities priced at or above $1.00 per share, and to make several related and conforming changes. Changes to the Fee Schedule pursuant to this proposal are effective upon filing,5 and the Exchange plans to implement the changes on April 1, 2021. The text of the proposed rule change is available at the Exchange’s website at www.iextrading.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(1). 4 17 CFR 240.19b–4. 5 15 U.S.C. 78s(b)(3)(A)(ii). 2 17 PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Fee Schedule, pursuant to IEX Rule 15.110(a) and (c), to modify the fees applicable to executions of and with displayable orders for securities priced at or above $1.00 per share, and to make several related and conforming changes. Specifically, the Exchange proposes not to charge Members 6 a fee for executions of orders that provide displayed liquidity, and proposes to charge a fee of $0.0006 per share for executions of orders that remove displayed liquidity, unless a lower fee applies.7 In addition, the Exchange proposes to revise the existing internalization fee, 8 which currently provides that there is no fee for executions when the adding and removing order originated from the same Member, to apply the proposed fees for adding and removing displayed liquidity provided by the same Member, while continuing to offer free executions for adding and removing non-displayed liquidity provided by the same Member. Currently, the Exchange charges a fee of $0.0003 per share for an execution at or above $1.00 that adds or removes displayed liquidity and charges a fee of $0.0009 per share for an execution at or above $1.00 that adds or removes nondisplayed liquidity. However, pursuant to a pricing incentive adopted when the Exchange began to offer D-Limit orders,9 a displayed or non-displayed D-Limit order 10 that provides liquidity and is executed at a price at or above $1.00 results in a free execution. As proposed, all displayed orders that provide liquidity will execute free of charge, and all orders that remove displayed liquidity will be charged a fee of $0.0006 per share, with the exception that executions below $1.00 will continue to be assessed a fee of 0.30% of the total dollar value of the execution 6 See IEX Rule 1.160(s). example, as discussed infra, if a Retail order removes displayed liquidity, the Retail order would not be charged a fee. 8 The internalization fee code is applied to orders in which the Member executes against resting liquidity added by such Member. 9 See Securities Exchange Act Release No. 89967 (September 23, 2020), 85 FR 63616 (October 8, 2020) (SR–IEX–2020–14). 10 See IEX Rule 11.190(b)(7). 7 For E:\FR\FM\05APN1.SGM 05APN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 63 / Monday, April 5, 2021 / Notices (unless otherwise eligible for a free execution in accordance with the IEX Fee Schedule). The proposed fee changes are designed to incentivize posting displayed liquidity on IEX in order to facilitate price discovery and price formation, which the Exchange believes benefits all Members and market participants. Further, as proposed, all nondisplayed orders that add or remove liquidity will now be charged a fee of $0.0009 per share, including D-Limit orders that add non-displayed liquidity, with the exception that executions below $1.00 will continue to be assessed a fee of 0.30% of the total dollar value of the execution (unless otherwise eligible for a free execution in accordance with the IEX Fee Schedule).11 IEX believes that the pricing incentive for D-Limit orders that add liquidity is no longer necessary, and such orders will be subject to the fees applicable to orders that add displayed or non-displayed liquidity, as applicable. Accordingly, the Exchange also proposes to delete the provision in the Fee Schedule specifying that a D-Limit order priced at or above $1.00 that provides liquidity results in a free execution. The Exchange also proposes to revise the application of the internalization fee such that it only results in free executions for transactions that add and remove resting non-displayed interest from the same Member. As noted above, currently, the internalization fee provides that there is no fee for executions when the adding and removing order originated from the same Member. With the change to the fee structure for executions of and with displayed liquidity, the Exchange determined that providing a free execution for orders that remove displayed liquidity is inconsistent with the proposed fee structure of charging $0.0006 for execution of such orders. Accordingly, as proposed, the internalization fee will provide a free execution only when a Member adds and removes resting non-displayed interest provided by that Member. Additionally, the Exchange proposes to delete the definition of ‘‘spread crossing eligible order’’ which is obsolete and not relevant to fees charged by IEX. Previously, IEX had provided a discounted fee to a buy order that is executable at the NBO 12 or a sell order that is executable at the NBB 13 after 11 For example, as discussed in this filing, nondisplayed orders that add or remove liquidity from the same Member will execute for free. 12 See IEX Rule 1.160(u). 13 See IEX Rule 1.160(u). VerDate Sep<11>2014 17:23 Apr 02, 2021 Jkt 253001 accounting for the order’s limit (if any), peg instruction (if any), market conditions, and all applicable rules and regulations.14 That discount was eliminated in 2018 and the language in the Fee Schedule is no longer applicable.15 IEX is not proposing to make any changes to the fees applicable to the execution of Retail orders and Retail Liquidity Provider 16 orders, which will each continue to execute for free. The Commission, in approving IEX’s Retail Price Improvement Program, acknowledged the value of exchanges’ offering incentives to attract both retail investor orders and orders specifically designated to execute only with retail orders.17 To effectuate the proposed changes, the Exchange proposes conforming changes to the applicable Base Fee Codes, Additional Fee Codes, and Fee Code Combinations and Associated Fees tables in the Fee Schedule to reflect the proposed fee changes and to provide information to Members on the relevant charges, including indicating whether an execution added or removed liquidity, as well as to remove text related to the current fee structure for D-Limit orders. As specified below, the Exchange also proposes to consistently refer to all orders that add liquidity as such, rather than using the term ‘‘provide’’ or ‘‘provided’’ in some Fee Code descriptions. Specifically, the following changes are proposed: 18 • Add modifier M to Base Fee Codes I (which applies to non-displayed liquidity) and L (which applies to displayed liquidity) to indicate that an order added liquidity. • Add modifier T to Base Fee Codes I and L to indicate that an order removed liquidity. • Update the description of Base Fee Code I, which is currently referred to as a Standard Match Fee, to separately describe Base Fee Code MI as ‘‘Add non-displayed liquidity’’ and TI as ‘‘Remove non-displayed liquidity.’’ Both Base Fee Codes will be subject to a fee 14 See Securities Exchange Act Release No. 83147 (May 1, 2018), 83 FR 20118 (May 7, 2018) (SR–IEX– 2018–09). 15 See Securities Exchange Act Release No. 83820 (August 10, 2018), 83 FR 40800 (August 16, 2018) (SR–IEX–2018–17). 16 See IEX Rule 11.190(b)(14). 17 See Securities Exchange Act Release No. 86619 (August 9, 2019), 84 FR 41769, 41771 (August 15, 2019) (SR–IEX–2019–05). 18 No fee changes are proposed for executions below $1.00, which will continue to be assessed a fee of 0.30% of the total dollar value of the execution (unless otherwise eligible for a free execution in accordance with the IEX Fee Schedule). See IEX Fee Schedule, https:// iextrading.com/trading/fees/. PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 17655 of $0.0009 per share, consistent with the current fees applicable to execution of such orders. • Update the description of Base Fee Code L, which is currently referred to as a Reduced Match Fee, to separately describe Base Fee Code ML as ‘‘Add displayed liquidity’’ and TL as ‘‘Remove displayed liquidity.’’ Base Fee Code ML will be free (rather than the current fee of $0.0003 per share applicable to execution of such orders) and Base Fee Code TL will be subject to a fee of $0.0006 (rather than the current fee of $0.0003 per share applicable to execution of such orders). • Relocate Base Fee Code X, which was previously included with Base Fee Code I as the Standard Match Fee, and describe it as ‘‘Opening process for nonlisted securities.’’ No change is proposed to the current fee of $0.0009 per share executed. • Amend the description of Additional Fee Code S (which applies to the internalization fee) to change the word ‘‘provided’’ to ‘‘added’’ and to update the Fee from ‘‘FREE’’ to instead read ‘‘See Relevant Fee Code Combinations Below.’’ This change reflects that removing displayed liquidity added by the same Member will no longer be a free execution, but instead be charged the standard $0.0006 fee for removing displayed liquidity. • Conform references to Fee Codes I and L in the Fee Code Combinations and Associated Fees section of the Fee Schedule to the changes made to the Base Fee Codes to include Fee Code Combinations MI, ML, TI and TL. • Delete Fee Code Combination IS, which applies when a Member executes against resting non-displayed liquidity provided by such Member, and replace with Fee Code Combinations MIS and TIS in order to indicate whether an order added or removed non-displayed liquidity. MIS will apply to an order in which a Member adds resting nondisplayed liquidity that executes against the Member’s removing interest. TIS will apply to an order that removes resting non-displayed liquidity added by such Member. Both Fee Code Combinations will continue to be free pursuant to the internalization fee. • Delete Fee Code Combination LS, which applies when a Member executes against resting displayed liquidity provided by such Member, and replace with Fee Code Combinations MLS and TLS in order to indicate whether an order added or removed liquidity. MLS will apply when a Member adds resting displayed liquidity that executes against the Member’s removing interest, specifying that execution of the order is free. This Fee Code Combination will be E:\FR\FM\05APN1.SGM 05APN1 jbell on DSKJLSW7X2PROD with NOTICES 17656 Federal Register / Vol. 86, No. 63 / Monday, April 5, 2021 / Notices free because the order added displayed liquidity. Fee Code Combination TLS will apply when a Member removes resting displayed liquidity added by such Member. This Fee Code Combination will be subject to a fee of $0.0006 per share which applies when an order that removes resting displayed liquidity applies. • Delete Fee Code Combination IR, which applies when a Retail order removes non-displayed liquidity, and replace with Fee Code Combination TIR to indicate that the order removed liquidity. The Fee Code Combination, as amended, will continue to be free. • Delete Fee Code Combination IA, which applies when a Retail Liquidity Provider order adds non-displayed liquidity to a Retail order, and replace with MIA to indicate that the order added liquidity. The Fee Code Combination, as amended, will continue to be free. • Delete Fee Code Combination LR, which applies when a Retail order removes displayed liquidity, and replace with Fee Code Combination TLR to indicate that the order removed liquidity. The Fee Code Combination, as amended, will continue to be free. • Delete Fee Code Combination ISR, which applies when a Retail orders removes non-displayed liquidity provided by such Member, and replace with Fee Code Combination TISR to indicate that the order removed liquidity. In addition, the term ‘‘provided’’ in the existing definition will be replaced with the term ‘‘added’’ for consistency. The Fee Code Combination, as amended, will continue to be free. • Delete Fee Code Combination ISA, which applies when a Retail Liquidity Provider order adds non-displayed liquidity to a Retail order provided by such Member, and replace with Fee Code Combination MISA to indicate that the order added liquidity. In addition, the term ‘‘provided’’ in the existing definition will be replaced with the term ‘‘added’’ for consistency. The Fee Code Combination, as amended, will continue to be free. • Delete Fee Code Combination LSR, which applies when a Retail order removes displayed liquidity provided by such Member, and replace with Fee Code Combination TLSR to indicate that the order removed liquidity. In addition, the term ‘‘provided’’ in the existing definition will be replaced with the term ‘‘added’’ for consistency. The Fee Code Combination, as amended, will continue to be free. Make a conforming change in the Transaction Fees section of the Fee Schedule to correct the reference to the VerDate Sep<11>2014 17:23 Apr 02, 2021 Jkt 253001 ‘‘Fee Codes and Associated Fees table’’ by changing it to read ‘‘Fee Code Combinations and Associated Fees table.’’ 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,19 in general, and furthers the objectives of Section 6(b)(4) 20 of the Act, in particular, in that it is designed to provide for the equitable allocation of reasonable fees among IEX Members and persons using its facilities. Additionally, IEX believes that the proposed changes to the Fee Schedule are consistent with the investor protection objectives of Section 6(b)(5) 21 of the Act, in particular, in that they are designed to prevent fraudulent and manipulative acts and practices; to promote just and equitable principles of trade; to foster cooperation and coordination with persons engaged in facilitating transactions in securities; to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest; and are not designed to permit unfair discrimination between customers, brokers, or dealers. The Exchange believes that the proposed changes are reasonable, fair and equitable, non-discriminatory, and consistent with the Act. The Exchange operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive. Within that context, providing free executions to displayed orders that add liquidity is designed to incentivize Members and other market participants to enter displayed orders on IEX by providing a pricing incentive for such orders without offering rebates, thereby contributing to price discovery and price formation, which is consistent with the overall goal of enhancing market quality. The Exchange currently offers free executions to displayed DLimit orders that add liquidity and does not believe that offering this pricing incentive to additional displayed orders represents a significant departure from pricing currently offered by the Exchange. The Exchange also believes that it is reasonable to increase the fee applicable to an order that removes displayed liquidity from $0.0003 per share to $0.0006 per share, which will continue to be lower than the maximum fee 19 15 U.S.C. 78f(b). U.S.C. 78f(b)(4). 21 15 U.S.C. 78f(b)(5). 20 15 PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 permitted by Regulation NMS,22 and to bifurcate the fees applicable to executions of resting displayed liquidity. Other exchanges use ‘‘makertaker’’ or ‘‘taker-maker’’ fee structures that apply different fees to orders that add versus remove liquidity, generally providing a rebate rather than charging a fee to adding or removing orders. In a ‘‘maker-taker’’ model an exchange will typically pay a rebate for an order that adds liquidity and charge a fee for an order that removes liquidity. The Exchange is not proposing to pay a rebate, but rather to not charge a fee to an order that adds liquidity and charge a modest fee to an order that removes liquidity. This approach is designed to reallocate in a revenue neutral manner the current fee structure where both the adder and remover are charged $0.0003 per share for executions involving displayed orders in order to incentivize displayed liquidity. As proposed the fee to remove displayed liquidity will be lower than the fee to add or remove non-displayed liquidity and is within the range (and in many cases much less than) the fees charged by competing exchanges to remove displayed or nondisplayed liquidity.23 Consequently, IEX does not believe that the proposed fee structure for adding and removing displayed liquidity raises any new or novel issues that the Commission has not already considered in the context of other exchanges’ fees. The Exchange believes that this fee structure will attract and incentivize displayed order flow as well as order flow seeking to trade with displayed order flow. The Exchange further believes that the proposed fee change is consistent with the Act’s requirement that the Exchange provide for an equitable allocation of fees that is also not unfairly discriminatory. As proposed, the fees for adding and removing displayed liquidity will apply in an equal and 22 See Regulation NMS Rule 611(c). 17 CFR 242.610(c) (for quotations of $1.00 or more, ‘‘the fee or fees cannot exceed or accumulate to more than $0.003 per share’’). 23 See Cboe BZX Fee Schedule (charging $0.0030 per share for any liquidity removing transactions), available at https://markets.cboe.com/us/equities/ membership/fee_schedule/bzx/; MIAX Pearl Equities Free Schedule (charging $0.0030 per share for any liquidity removing executions), available at https://www.miaxoptions.com/sites/default/files/ fee_schedule-files/MIAX_PEARL_Equities_Fee_ Schedule_01292021.pdf; MEMX Fee Schedule (charging $0.0026 per share for any liquidity removing executions), available at https:// info.memxtrading.com/fee-schedule/; Nasdaq Equity 7 Section 118(a) (charging $0.0030 per share for any liquidity removing executions), available at https://listingcenter.nasdaq.com/rulebook/nasdaq/ rules/nasdaq-equity-7; NYSE Fee Schedule (charging $0.00275 per share for any liquidity removing executions), available at https:// www.nyse.com/markets/nyse/trading-info/fees. E:\FR\FM\05APN1.SGM 05APN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 86, No. 63 / Monday, April 5, 2021 / Notices nondiscriminatory manner to all Members. All Members are eligible to enter displayed orders and orders to remove displayed orders. Moreover, to the extent the proposed change is successful in incentivizing the entry and execution of displayed orders on IEX, such greater liquidity will benefit all market participants by increasing price discovery and price formation as well as market quality and execution opportunities. The Exchange also believes that it is reasonable to revise the internalization fee to apply only to executions of nondisplayed orders and to refer Members to the relevant Fee Code Combinations for specific details on fees for such orders. As discussed in the Purpose section, with the change to the fee structure for executions of and with displayed liquidity, the Exchange determined that the internalization fee incentive is not necessary for executions of displayed orders (which by definition are adding orders that receive a free execution). Furthermore, as discussed in the Purpose section, providing a free execution for orders that remove displayed liquidity is inconsistent with the proposed fee structure of charging $0.0006 for all orders that remove displayed liquidity. The Exchange further believes that this approach is equitable and not unfairly discriminatory because it will apply to all Members in the same manner. The internalization fee was adopted when IEX launched as a national securities exchange 24 and was designed to incentivize Members (and their customers) to send orders to IEX that may otherwise be internalized off exchange with the overall goals of, among other things, enhancing order interaction on the Exchange with the resultant benefit of exchange transparency, regulation, and oversight.25 The Exchange continues to believe that these important goals are served by offering free non-displayed executions for orders subject to the internalization fee, as well as allowing displayed adding orders subject to the internalization fee to execute for free. Charging the displayed liquidity removing fee to orders subject to the internalization fee is reasonable because the proposed pricing structure for execution of displayed liquidity is designed to incentivize the adding of displayed liquidity, thereby facilitating price discovery and price formation, which will inure to the benefit of any 24 See Securities Exchange Act Release No. 78550 (August 11, 2016), 81 FR 54873 (August 17, 2016) (SR–IEX–2016–09). 25 See supra note 24 at 54875. VerDate Sep<11>2014 17:23 Apr 02, 2021 Jkt 253001 market participants seeking to interact with IEX’s displayed liquidity, and the fee to access such liquidity will still remain well below the rate charged by many other competing exchanges. Furthermore, the Exchange believes it is reasonable to charge non-displayed liquidity adding D-Limit orders the standard $0.0009 fee for non-displayed executions. As discussed in the Purpose section, IEX believes that the pricing incentive for D-Limit orders that add liquidity is no longer necessary, and such orders should be subject to the fees applicable to orders that add displayed or non-displayed liquidity, as applicable, and consistent with the goal of incentivizing displayed liquidity on IEX. The Exchange also believes that this approach is equitable and not unfairly discriminatory because it will apply to all Members in the same manner, and all Members are eligible to enter displayed and non-displayed orders. In addition, the Exchange believes that it is reasonable to revise the applicable Base Fee Codes, Additional Fee Codes, and Fee Code Combinations and Associated Fees to reflect the proposed fee changes and to provide information to Members on the relevant charges, including indicating whether an execution was to add or remove liquidity, as well as to remove the text related to the current fee structure for DLimit orders. The revisions are designed to reflect the fee changes, and also to provide enhanced clarity to the applicable Base Fee Codes, Additional Fee Codes, and Fee Code Combinations and Associated Fees with respect to whether an execution was to add or remove liquidity. Based on informal feedback from Members, the Exchange understands that this information would be useful to them in reviewing trading activity on IEX. Other exchanges provide similar information,26 so the Exchange does not believe that adding such information raises any new or novel issues not already considered by the Commission. Accordingly, the Exchange believes that it is reasonable to revise the Base Fee Codes, Additional Fee Codes, and Fee Code Combinations as proposed in order to reflect the applicable fees and add additional relevant information. Further, the Exchange believes that it is reasonable to make a conforming change to delete the provision in the Fee Schedule specifying that a D-Limit order priced at or above $1.00 that provides 26 See, e.g., Securities Exchange Act Release No. 90076 (October 2, 2020), 85 FR 63620, 63621 (October 8, 2020) (SR–MEMX–2020–10) (describing how the exchange provides ‘‘distinct Fee Codes on execution reports provided to Members.’’) PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 17657 liquidity results in a free execution. As discussed in the Purpose section, this language is no longer accurate because non-displayed liquidity adding D-Limit orders will now be charged the standard fee for non-displayed liquidity adding orders, and deletion will avoid any unnecessary confusion as to the applicable fees. Finally, the Exchange believes it is reasonable to delete the definition of ‘‘spread crossing eligible order’’ which is no longer relevant to fees charged by IEX, as described in the Purpose section, in order to avoid any unnecessary confusion regarding whether any fees are impacted by whether an order is a ‘‘spread crossing eligible order.’’ B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that the proposed fees will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange operates in a highly competitive market in which market participants can easily direct their orders to competing venues, including off-exchange venues, if its fees are viewed as non-competitive. Moreover, IEX believes that the proposed fees are designed to enhance competition by increasing the Exchange’s pool of displayed liquidity, and to the extent that displayed liquidity increases, would contribute to the public price discovery process. Further, subject to the SEC rule filing process, other exchanges could adopt a similar order type and fee incentive. The Exchange also does not believe that the proposed rule change will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. While Members that add liquidity using displayed orders will be subject to different fees based on this usage, those differences are not based on the type of Member entering orders but on whether the Member chose to submit displayed liquidity providing orders. As noted above, not only can any Member submit displayed liquidity adding orders, but every Member would benefit from the availability of more liquidity on the Exchange that the proposed fees are designed to incentivize. The related and conforming changes are designed, as discussed in the Purpose and Statutory Basis sections, to provide additional E:\FR\FM\05APN1.SGM 05APN1 17658 Federal Register / Vol. 86, No. 63 / Monday, April 5, 2021 / Notices clarity and remove superfluous provisions. Accordingly, the Exchange does not believe that these changes will have any impact on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) 27 of the Act. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings under Section 19(b)(2)(B) 28 of the Act to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File No. SR– IEX–2021–05 on the subject line. jbell on DSKJLSW7X2PROD with NOTICES Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File No. SR–IEX–2021–05. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s 27 15 28 15 U.S.C. 78s(b)(3)(A)(ii). U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 17:23 Apr 02, 2021 internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–IEX–2021–05, and should be submitted on or before April 26, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.29 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–06886 Filed 4–2–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91442; File No. SR–NYSE– 2020–105] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing of Amendment No. 1 and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1, To Revise Rules 46 and 46A and Other Related Rules To Permit the Appointment of Trading Officials March 30, 2021. II. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes revisions to Rules 46 and 46A to permit the appointment of Trading Officials and to make conforming changes to certain Exchange rules related to Floor Official duties and responsibilities. This Amendment No. 1 to SR–NYSE–2020– 105 replaces and supersedes the original filing in its entirety. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. III. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes revisions to Rules 46 and 46A to permit the appointment of Trading Officials and to make conforming changes to certain Exchange rules related to Floor Official duties and responsibilities. This Amendment No. 1 to SR–NYSE–2020– I. Introduction On December 15, 2020, New York Stock Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act 29 17 Jkt 253001 of 1934 (‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend NYSE Rules 46 and 46A, and other related rules, to permit the appointment of Trading Officials. The proposed rule change was published for comment in the Federal Register on December 30, 2020.3 On February 9, 2021, the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to approve or disapprove the proposed rule change until March 30, 2021.4 On March 25, 2021, the Exchange submitted Amendment No. 1 to the proposed rule change.5 The Commission has received no comments on the proposed rule change. The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested persons and is instituting proceedings under Section 19(b)(2)(B) of the Exchange Act 6 to determine whether to approve or disapprove the proposed rule change, as modified by Amendment No. 1. PO 00000 CFR 200.30–3(a)(12). Frm 00073 Fmt 4703 Sfmt 4703 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 90776 (Dec. 22, 2020), 85 FR 86625 (Dec. 30, 2020) (‘‘Notice’’). 4 See Securities Exchange Act Release No. 91084 (Feb. 9, 2021), 86 FR 9545 (Feb. 16, 2021). 5 See https://www.sec.gov/comments/sr-nyse2020-105/srnyse2020105-8545367-230641.pdf. 6 15 U.S.C. 78s(b)(2)(B). 2 17 E:\FR\FM\05APN1.SGM 05APN1

Agencies

[Federal Register Volume 86, Number 63 (Monday, April 5, 2021)]
[Notices]
[Pages 17654-17658]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-06886]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91443; File No. SR-IEX-2021-05]


Self-Regulatory Organizations: Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change to 
Transaction Fees Pursuant to IEX Rule 15.110

March 30, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on March 23, 2021, the Investors Exchange LLC (``IEX'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) under the Act,\3\ 
and Rule 19b-4 thereunder,\4\ IEX is filing with the Commission a 
proposed rule change to amend its Fee Schedule, pursuant to IEX Rule 
15.110(a) and (c) (the ``Fee Schedule''), to modify the fees applicable 
to executions of and with displayed orders for securities priced at or 
above $1.00 per share, and to make several related and conforming 
changes. Changes to the Fee Schedule pursuant to this proposal are 
effective upon filing,\5\ and the Exchange plans to implement the 
changes on April 1, 2021.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78s(b)(1).
    \4\ 17 CFR 240.19b-4.
    \5\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    The text of the proposed rule change is available at the Exchange's 
website at www.iextrading.com, at the principal office of the Exchange, 
and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of and basis for the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fee Schedule, pursuant to IEX 
Rule 15.110(a) and (c), to modify the fees applicable to executions of 
and with displayable orders for securities priced at or above $1.00 per 
share, and to make several related and conforming changes. 
Specifically, the Exchange proposes not to charge Members \6\ a fee for 
executions of orders that provide displayed liquidity, and proposes to 
charge a fee of $0.0006 per share for executions of orders that remove 
displayed liquidity, unless a lower fee applies.\7\ In addition, the 
Exchange proposes to revise the existing internalization fee, \8\ which 
currently provides that there is no fee for executions when the adding 
and removing order originated from the same Member, to apply the 
proposed fees for adding and removing displayed liquidity provided by 
the same Member, while continuing to offer free executions for adding 
and removing non-displayed liquidity provided by the same Member.
---------------------------------------------------------------------------

    \6\ See IEX Rule 1.160(s).
    \7\ For example, as discussed infra, if a Retail order removes 
displayed liquidity, the Retail order would not be charged a fee.
    \8\ The internalization fee code is applied to orders in which 
the Member executes against resting liquidity added by such Member.
---------------------------------------------------------------------------

    Currently, the Exchange charges a fee of $0.0003 per share for an 
execution at or above $1.00 that adds or removes displayed liquidity 
and charges a fee of $0.0009 per share for an execution at or above 
$1.00 that adds or removes non-displayed liquidity. However, pursuant 
to a pricing incentive adopted when the Exchange began to offer D-Limit 
orders,\9\ a displayed or non-displayed D-Limit order \10\ that 
provides liquidity and is executed at a price at or above $1.00 results 
in a free execution.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 89967 (September 23, 
2020), 85 FR 63616 (October 8, 2020) (SR-IEX-2020-14).
    \10\ See IEX Rule 11.190(b)(7).
---------------------------------------------------------------------------

    As proposed, all displayed orders that provide liquidity will 
execute free of charge, and all orders that remove displayed liquidity 
will be charged a fee of $0.0006 per share, with the exception that 
executions below $1.00 will continue to be assessed a fee of 0.30% of 
the total dollar value of the execution

[[Page 17655]]

(unless otherwise eligible for a free execution in accordance with the 
IEX Fee Schedule). The proposed fee changes are designed to incentivize 
posting displayed liquidity on IEX in order to facilitate price 
discovery and price formation, which the Exchange believes benefits all 
Members and market participants.
    Further, as proposed, all non-displayed orders that add or remove 
liquidity will now be charged a fee of $0.0009 per share, including D-
Limit orders that add non-displayed liquidity, with the exception that 
executions below $1.00 will continue to be assessed a fee of 0.30% of 
the total dollar value of the execution (unless otherwise eligible for 
a free execution in accordance with the IEX Fee Schedule).\11\ IEX 
believes that the pricing incentive for D-Limit orders that add 
liquidity is no longer necessary, and such orders will be subject to 
the fees applicable to orders that add displayed or non-displayed 
liquidity, as applicable. Accordingly, the Exchange also proposes to 
delete the provision in the Fee Schedule specifying that a D-Limit 
order priced at or above $1.00 that provides liquidity results in a 
free execution.
---------------------------------------------------------------------------

    \11\ For example, as discussed in this filing, non-displayed 
orders that add or remove liquidity from the same Member will 
execute for free.
---------------------------------------------------------------------------

    The Exchange also proposes to revise the application of the 
internalization fee such that it only results in free executions for 
transactions that add and remove resting non-displayed interest from 
the same Member. As noted above, currently, the internalization fee 
provides that there is no fee for executions when the adding and 
removing order originated from the same Member. With the change to the 
fee structure for executions of and with displayed liquidity, the 
Exchange determined that providing a free execution for orders that 
remove displayed liquidity is inconsistent with the proposed fee 
structure of charging $0.0006 for execution of such orders. 
Accordingly, as proposed, the internalization fee will provide a free 
execution only when a Member adds and removes resting non-displayed 
interest provided by that Member.
    Additionally, the Exchange proposes to delete the definition of 
``spread crossing eligible order'' which is obsolete and not relevant 
to fees charged by IEX. Previously, IEX had provided a discounted fee 
to a buy order that is executable at the NBO \12\ or a sell order that 
is executable at the NBB \13\ after accounting for the order's limit 
(if any), peg instruction (if any), market conditions, and all 
applicable rules and regulations.\14\ That discount was eliminated in 
2018 and the language in the Fee Schedule is no longer applicable.\15\
---------------------------------------------------------------------------

    \12\ See IEX Rule 1.160(u).
    \13\ See IEX Rule 1.160(u).
    \14\ See Securities Exchange Act Release No. 83147 (May 1, 
2018), 83 FR 20118 (May 7, 2018) (SR-IEX-2018-09).
    \15\ See Securities Exchange Act Release No. 83820 (August 10, 
2018), 83 FR 40800 (August 16, 2018) (SR-IEX-2018-17).
---------------------------------------------------------------------------

    IEX is not proposing to make any changes to the fees applicable to 
the execution of Retail orders and Retail Liquidity Provider \16\ 
orders, which will each continue to execute for free. The Commission, 
in approving IEX's Retail Price Improvement Program, acknowledged the 
value of exchanges' offering incentives to attract both retail investor 
orders and orders specifically designated to execute only with retail 
orders.\17\
---------------------------------------------------------------------------

    \16\ See IEX Rule 11.190(b)(14).
    \17\ See Securities Exchange Act Release No. 86619 (August 9, 
2019), 84 FR 41769, 41771 (August 15, 2019) (SR-IEX-2019-05).
---------------------------------------------------------------------------

    To effectuate the proposed changes, the Exchange proposes 
conforming changes to the applicable Base Fee Codes, Additional Fee 
Codes, and Fee Code Combinations and Associated Fees tables in the Fee 
Schedule to reflect the proposed fee changes and to provide information 
to Members on the relevant charges, including indicating whether an 
execution added or removed liquidity, as well as to remove text related 
to the current fee structure for D-Limit orders. As specified below, 
the Exchange also proposes to consistently refer to all orders that add 
liquidity as such, rather than using the term ``provide'' or 
``provided'' in some Fee Code descriptions.
    Specifically, the following changes are proposed: \18\
---------------------------------------------------------------------------

    \18\ No fee changes are proposed for executions below $1.00, 
which will continue to be assessed a fee of 0.30% of the total 
dollar value of the execution (unless otherwise eligible for a free 
execution in accordance with the IEX Fee Schedule). See IEX Fee 
Schedule, https://iextrading.com/trading/fees/.
---------------------------------------------------------------------------

     Add modifier M to Base Fee Codes I (which applies to non-
displayed liquidity) and L (which applies to displayed liquidity) to 
indicate that an order added liquidity.
     Add modifier T to Base Fee Codes I and L to indicate that 
an order removed liquidity.
     Update the description of Base Fee Code I, which is 
currently referred to as a Standard Match Fee, to separately describe 
Base Fee Code MI as ``Add non-displayed liquidity'' and TI as ``Remove 
non-displayed liquidity.'' Both Base Fee Codes will be subject to a fee 
of $0.0009 per share, consistent with the current fees applicable to 
execution of such orders.
     Update the description of Base Fee Code L, which is 
currently referred to as a Reduced Match Fee, to separately describe 
Base Fee Code ML as ``Add displayed liquidity'' and TL as ``Remove 
displayed liquidity.'' Base Fee Code ML will be free (rather than the 
current fee of $0.0003 per share applicable to execution of such 
orders) and Base Fee Code TL will be subject to a fee of $0.0006 
(rather than the current fee of $0.0003 per share applicable to 
execution of such orders).
     Relocate Base Fee Code X, which was previously included 
with Base Fee Code I as the Standard Match Fee, and describe it as 
``Opening process for non-listed securities.'' No change is proposed to 
the current fee of $0.0009 per share executed.
     Amend the description of Additional Fee Code S (which 
applies to the internalization fee) to change the word ``provided'' to 
``added'' and to update the Fee from ``FREE'' to instead read ``See 
Relevant Fee Code Combinations Below.'' This change reflects that 
removing displayed liquidity added by the same Member will no longer be 
a free execution, but instead be charged the standard $0.0006 fee for 
removing displayed liquidity.
     Conform references to Fee Codes I and L in the Fee Code 
Combinations and Associated Fees section of the Fee Schedule to the 
changes made to the Base Fee Codes to include Fee Code Combinations MI, 
ML, TI and TL.
     Delete Fee Code Combination IS, which applies when a 
Member executes against resting non-displayed liquidity provided by 
such Member, and replace with Fee Code Combinations MIS and TIS in 
order to indicate whether an order added or removed non-displayed 
liquidity. MIS will apply to an order in which a Member adds resting 
non-displayed liquidity that executes against the Member's removing 
interest. TIS will apply to an order that removes resting non-displayed 
liquidity added by such Member. Both Fee Code Combinations will 
continue to be free pursuant to the internalization fee.
     Delete Fee Code Combination LS, which applies when a 
Member executes against resting displayed liquidity provided by such 
Member, and replace with Fee Code Combinations MLS and TLS in order to 
indicate whether an order added or removed liquidity. MLS will apply 
when a Member adds resting displayed liquidity that executes against 
the Member's removing interest, specifying that execution of the order 
is free. This Fee Code Combination will be

[[Page 17656]]

free because the order added displayed liquidity. Fee Code Combination 
TLS will apply when a Member removes resting displayed liquidity added 
by such Member. This Fee Code Combination will be subject to a fee of 
$0.0006 per share which applies when an order that removes resting 
displayed liquidity applies.
     Delete Fee Code Combination IR, which applies when a 
Retail order removes non-displayed liquidity, and replace with Fee Code 
Combination TIR to indicate that the order removed liquidity. The Fee 
Code Combination, as amended, will continue to be free.
     Delete Fee Code Combination IA, which applies when a 
Retail Liquidity Provider order adds non-displayed liquidity to a 
Retail order, and replace with MIA to indicate that the order added 
liquidity. The Fee Code Combination, as amended, will continue to be 
free.
     Delete Fee Code Combination LR, which applies when a 
Retail order removes displayed liquidity, and replace with Fee Code 
Combination TLR to indicate that the order removed liquidity. The Fee 
Code Combination, as amended, will continue to be free.
     Delete Fee Code Combination ISR, which applies when a 
Retail orders removes non-displayed liquidity provided by such Member, 
and replace with Fee Code Combination TISR to indicate that the order 
removed liquidity. In addition, the term ``provided'' in the existing 
definition will be replaced with the term ``added'' for consistency. 
The Fee Code Combination, as amended, will continue to be free.
     Delete Fee Code Combination ISA, which applies when a 
Retail Liquidity Provider order adds non-displayed liquidity to a 
Retail order provided by such Member, and replace with Fee Code 
Combination MISA to indicate that the order added liquidity. In 
addition, the term ``provided'' in the existing definition will be 
replaced with the term ``added'' for consistency. The Fee Code 
Combination, as amended, will continue to be free.
     Delete Fee Code Combination LSR, which applies when a 
Retail order removes displayed liquidity provided by such Member, and 
replace with Fee Code Combination TLSR to indicate that the order 
removed liquidity. In addition, the term ``provided'' in the existing 
definition will be replaced with the term ``added'' for consistency. 
The Fee Code Combination, as amended, will continue to be free.
    Make a conforming change in the Transaction Fees section of the Fee 
Schedule to correct the reference to the ``Fee Codes and Associated 
Fees table'' by changing it to read ``Fee Code Combinations and 
Associated Fees table.''
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\19\ in general, and furthers the 
objectives of Section 6(b)(4) \20\ of the Act, in particular, in that 
it is designed to provide for the equitable allocation of reasonable 
fees among IEX Members and persons using its facilities. Additionally, 
IEX believes that the proposed changes to the Fee Schedule are 
consistent with the investor protection objectives of Section 6(b)(5) 
\21\ of the Act, in particular, in that they are designed to prevent 
fraudulent and manipulative acts and practices; to promote just and 
equitable principles of trade; to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities; to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest; and are not designed to permit 
unfair discrimination between customers, brokers, or dealers.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(4).
    \21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes are reasonable, 
fair and equitable, non-discriminatory, and consistent with the Act. 
The Exchange operates in a highly competitive market in which market 
participants can readily direct order flow to competing venues if they 
deem fee levels at a particular venue to be excessive. Within that 
context, providing free executions to displayed orders that add 
liquidity is designed to incentivize Members and other market 
participants to enter displayed orders on IEX by providing a pricing 
incentive for such orders without offering rebates, thereby 
contributing to price discovery and price formation, which is 
consistent with the overall goal of enhancing market quality. The 
Exchange currently offers free executions to displayed D-Limit orders 
that add liquidity and does not believe that offering this pricing 
incentive to additional displayed orders represents a significant 
departure from pricing currently offered by the Exchange.
    The Exchange also believes that it is reasonable to increase the 
fee applicable to an order that removes displayed liquidity from 
$0.0003 per share to $0.0006 per share, which will continue to be lower 
than the maximum fee permitted by Regulation NMS,\22\ and to bifurcate 
the fees applicable to executions of resting displayed liquidity. Other 
exchanges use ``maker-taker'' or ``taker-maker'' fee structures that 
apply different fees to orders that add versus remove liquidity, 
generally providing a rebate rather than charging a fee to adding or 
removing orders. In a ``maker-taker'' model an exchange will typically 
pay a rebate for an order that adds liquidity and charge a fee for an 
order that removes liquidity. The Exchange is not proposing to pay a 
rebate, but rather to not charge a fee to an order that adds liquidity 
and charge a modest fee to an order that removes liquidity. This 
approach is designed to reallocate in a revenue neutral manner the 
current fee structure where both the adder and remover are charged 
$0.0003 per share for executions involving displayed orders in order to 
incentivize displayed liquidity. As proposed the fee to remove 
displayed liquidity will be lower than the fee to add or remove non-
displayed liquidity and is within the range (and in many cases much 
less than) the fees charged by competing exchanges to remove displayed 
or non-displayed liquidity.\23\ Consequently, IEX does not believe that 
the proposed fee structure for adding and removing displayed liquidity 
raises any new or novel issues that the Commission has not already 
considered in the context of other exchanges' fees. The Exchange 
believes that this fee structure will attract and incentivize displayed 
order flow as well as order flow seeking to trade with displayed order 
flow.
---------------------------------------------------------------------------

    \22\ See Regulation NMS Rule 611(c). 17 CFR 242.610(c) (for 
quotations of $1.00 or more, ``the fee or fees cannot exceed or 
accumulate to more than $0.003 per share'').
    \23\ See Cboe BZX Fee Schedule (charging $0.0030 per share for 
any liquidity removing transactions), available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/; MIAX 
Pearl Equities Free Schedule (charging $0.0030 per share for any 
liquidity removing executions), available at https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_PEARL_Equities_Fee_Schedule_01292021.pdf; MEMX Fee Schedule 
(charging $0.0026 per share for any liquidity removing executions), 
available at https://info.memxtrading.com/fee-schedule/; Nasdaq 
Equity 7 Section 118(a) (charging $0.0030 per share for any 
liquidity removing executions), available at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/nasdaq-equity-7; NYSE 
Fee Schedule (charging $0.00275 per share for any liquidity removing 
executions), available at https://www.nyse.com/markets/nyse/trading-info/fees.
---------------------------------------------------------------------------

    The Exchange further believes that the proposed fee change is 
consistent with the Act's requirement that the Exchange provide for an 
equitable allocation of fees that is also not unfairly discriminatory. 
As proposed, the fees for adding and removing displayed liquidity will 
apply in an equal and

[[Page 17657]]

nondiscriminatory manner to all Members. All Members are eligible to 
enter displayed orders and orders to remove displayed orders. Moreover, 
to the extent the proposed change is successful in incentivizing the 
entry and execution of displayed orders on IEX, such greater liquidity 
will benefit all market participants by increasing price discovery and 
price formation as well as market quality and execution opportunities.
    The Exchange also believes that it is reasonable to revise the 
internalization fee to apply only to executions of non-displayed orders 
and to refer Members to the relevant Fee Code Combinations for specific 
details on fees for such orders. As discussed in the Purpose section, 
with the change to the fee structure for executions of and with 
displayed liquidity, the Exchange determined that the internalization 
fee incentive is not necessary for executions of displayed orders 
(which by definition are adding orders that receive a free execution). 
Furthermore, as discussed in the Purpose section, providing a free 
execution for orders that remove displayed liquidity is inconsistent 
with the proposed fee structure of charging $0.0006 for all orders that 
remove displayed liquidity. The Exchange further believes that this 
approach is equitable and not unfairly discriminatory because it will 
apply to all Members in the same manner. The internalization fee was 
adopted when IEX launched as a national securities exchange \24\ and 
was designed to incentivize Members (and their customers) to send 
orders to IEX that may otherwise be internalized off exchange with the 
overall goals of, among other things, enhancing order interaction on 
the Exchange with the resultant benefit of exchange transparency, 
regulation, and oversight.\25\ The Exchange continues to believe that 
these important goals are served by offering free non-displayed 
executions for orders subject to the internalization fee, as well as 
allowing displayed adding orders subject to the internalization fee to 
execute for free. Charging the displayed liquidity removing fee to 
orders subject to the internalization fee is reasonable because the 
proposed pricing structure for execution of displayed liquidity is 
designed to incentivize the adding of displayed liquidity, thereby 
facilitating price discovery and price formation, which will inure to 
the benefit of any market participants seeking to interact with IEX's 
displayed liquidity, and the fee to access such liquidity will still 
remain well below the rate charged by many other competing exchanges.
---------------------------------------------------------------------------

    \24\ See Securities Exchange Act Release No. 78550 (August 11, 
2016), 81 FR 54873 (August 17, 2016) (SR-IEX-2016-09).
    \25\ See supra note 24 at 54875.
---------------------------------------------------------------------------

    Furthermore, the Exchange believes it is reasonable to charge non-
displayed liquidity adding D-Limit orders the standard $0.0009 fee for 
non-displayed executions. As discussed in the Purpose section, IEX 
believes that the pricing incentive for D-Limit orders that add 
liquidity is no longer necessary, and such orders should be subject to 
the fees applicable to orders that add displayed or non-displayed 
liquidity, as applicable, and consistent with the goal of incentivizing 
displayed liquidity on IEX. The Exchange also believes that this 
approach is equitable and not unfairly discriminatory because it will 
apply to all Members in the same manner, and all Members are eligible 
to enter displayed and non-displayed orders.
    In addition, the Exchange believes that it is reasonable to revise 
the applicable Base Fee Codes, Additional Fee Codes, and Fee Code 
Combinations and Associated Fees to reflect the proposed fee changes 
and to provide information to Members on the relevant charges, 
including indicating whether an execution was to add or remove 
liquidity, as well as to remove the text related to the current fee 
structure for D-Limit orders. The revisions are designed to reflect the 
fee changes, and also to provide enhanced clarity to the applicable 
Base Fee Codes, Additional Fee Codes, and Fee Code Combinations and 
Associated Fees with respect to whether an execution was to add or 
remove liquidity. Based on informal feedback from Members, the Exchange 
understands that this information would be useful to them in reviewing 
trading activity on IEX. Other exchanges provide similar 
information,\26\ so the Exchange does not believe that adding such 
information raises any new or novel issues not already considered by 
the Commission. Accordingly, the Exchange believes that it is 
reasonable to revise the Base Fee Codes, Additional Fee Codes, and Fee 
Code Combinations as proposed in order to reflect the applicable fees 
and add additional relevant information.
---------------------------------------------------------------------------

    \26\ See, e.g., Securities Exchange Act Release No. 90076 
(October 2, 2020), 85 FR 63620, 63621 (October 8, 2020) (SR-MEMX-
2020-10) (describing how the exchange provides ``distinct Fee Codes 
on execution reports provided to Members.'')
---------------------------------------------------------------------------

    Further, the Exchange believes that it is reasonable to make a 
conforming change to delete the provision in the Fee Schedule 
specifying that a D-Limit order priced at or above $1.00 that provides 
liquidity results in a free execution. As discussed in the Purpose 
section, this language is no longer accurate because non-displayed 
liquidity adding D-Limit orders will now be charged the standard fee 
for non-displayed liquidity adding orders, and deletion will avoid any 
unnecessary confusion as to the applicable fees.
    Finally, the Exchange believes it is reasonable to delete the 
definition of ``spread crossing eligible order'' which is no longer 
relevant to fees charged by IEX, as described in the Purpose section, 
in order to avoid any unnecessary confusion regarding whether any fees 
are impacted by whether an order is a ``spread crossing eligible 
order.''

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange does not 
believe that the proposed fees will impose any burden on intermarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The Exchange operates in a highly competitive 
market in which market participants can easily direct their orders to 
competing venues, including off-exchange venues, if its fees are viewed 
as non-competitive. Moreover, IEX believes that the proposed fees are 
designed to enhance competition by increasing the Exchange's pool of 
displayed liquidity, and to the extent that displayed liquidity 
increases, would contribute to the public price discovery process. 
Further, subject to the SEC rule filing process, other exchanges could 
adopt a similar order type and fee incentive.
    The Exchange also does not believe that the proposed rule change 
will impose any burden on intramarket competition that is not necessary 
or appropriate in furtherance of the purposes of the Act. While Members 
that add liquidity using displayed orders will be subject to different 
fees based on this usage, those differences are not based on the type 
of Member entering orders but on whether the Member chose to submit 
displayed liquidity providing orders. As noted above, not only can any 
Member submit displayed liquidity adding orders, but every Member would 
benefit from the availability of more liquidity on the Exchange that 
the proposed fees are designed to incentivize. The related and 
conforming changes are designed, as discussed in the Purpose and 
Statutory Basis sections, to provide additional

[[Page 17658]]

clarity and remove superfluous provisions. Accordingly, the Exchange 
does not believe that these changes will have any impact on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) \27\ of the Act.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \28\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \28\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File No. SR-IEX-2021-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File No. SR-IEX-2021-05. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File No. SR-IEX-2021-05, and should be submitted on or 
before April 26, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-06886 Filed 4-2-21; 8:45 am]
BILLING CODE 8011-01-P
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